Homeowners insurance must be purchased as a condition of your mortgage either for your new home or for the one in which you now reside, but how well do we understand what we are buying, much less if it’s at a fair price?
For 2013, resolve to get your homeowner’s insurance right.
A standard homeowner’s policy will protect you in four basic areas: coverage for the structure, the contents, liability protection, and reimbursement for additional living expenses if the home becomes uninhabitable.
Water damage is the most common problem — and a sore spot for Forest Parkers after recent flooding in the past couple of years.
In 2010, two “100-year storms” hit Forest Park, a month apart. Some residents had already started rehabs on their destroyed basements when the second disaster struck. Residents filled out FEMA relief forms and hoped for the best. Then in July 2011, a year to the day, another heavy storm brought more flooding grief. Local residents started “Forest Parkers Against Flooding” on Facebook to share ideas and commiserate about flooding information.
Many homeowners found out the hard way that they weren’t covered for flooding. A standard policy has no flood insurance.
Forest Park offers its residents some assistance. Get information on the Flood Prevention Grant Program at village hall or on the village website, www.ForestPark.net.
According to Lenore L. Koca who has been a State Farm insurance agent in Forest Park for almost 30 years, “I’ve seen some of the most severe weather in our area in the last 3-5 years, so much of it from water damage.”
A summary of flood insurance can be found here: www.FloodSmart.gov.
Don’t confuse “flooding” with “seepage.” Seepage is not covered by insurance and considered your maintenance responsibility. It may be caused by foundation cracks, faulty gutters, downspouts, roof problems, etc. If water damage is caused by sewer lines backing up in the drain pipes, the appropriately named Sewer Backup Coverage is a separate policy. When asked if owners should buy sewer back-up coverage, Koca says there are five different levels of cost and coverage, so talking with an agent will determine your comfort level.
Thunderstorms can cause other problems. Besides the potential water damage, most standard policies do not cover damage to trees and landscaping but some do have debris clean-up allowances. Suppose it’s your tree that falls on your neighbor’s roof — “What’s my liability?” is rather a daunting question to ask after the fact.
When selling or buying a home, both parties must sign off on the property disclosures. One of the most important ones is the Residential Real Property Disclosure Report. It provides prospective buyers with information regarding material defects in the residential property and, among other issues, specifically asks the seller if he or she is aware of flooding or recurring leakage problems in the crawlspace or basement.
Forest Park sellers may dread this moment, but facing a problem and taking steps to fix it, or insure that it won’t happen again, will bring peace of mind.
There are also disclosures that question the seller’s knowledge regarding lead paint, radon, and mold issues with the property. All disclosures are legal documents, and both parties should consult their respective attorneys regarding any questions they may have.
Know that coverage for the structure is not based on current market sales values — and unfortunately, we’ve seen these decline — but on any replacement costs. Construction costs have not declined! If you’re curious, visit www.Building-Cost.net and find a free tool to help you estimate what it might cost to rebuild your home at today’s prices.
As to your possessions, you may remember what you originally paid for them but do you have any idea as to today’s replacement costs? Take an inventory with photos/videos, and keep the drawers, cabinet, and closet doors open to jog your memory. If you go to www.KnowYourStuff.org, you’ll find a free inventory guide.
Here’s a tip for buyers: When seriously considering a home, ask the owner to provide a C.L.U.E. report from Nexis Lexis. It details a five-year insurance loss history of the property. For sellers, if you rent your home, you’ll need a “Rental Dwelling” policy which may be 25-50 percent more than your homeowner’s policy! Factor any increase into your rental rate. Also, insist that renters purchase adequate rental insurance from a reputable company as part of the rental agreement.
So before you buy or renew your homeowners insurance in 2013, you have many things to consider. Keep in mind potential problems we’ve discussed, ask about discounts for bundling all of your insurance needs with the same company, get discounts for alarms, sensors, etc. You can also check your potential or current insurer’s complaint record at eapps.naic.org, which is the National Association of Insurance Commissioners Consumer Information Source.
Lenore L. Koca advises, “Your homeowner’s policy depends on what you want to protect, what’s your comfort level. Remember, your home may be the biggest financial asset you have. It’s a lifelong investment.” So read the policy you have or are considering. Know what you’re paying for. Don’t be surprised.
Maria Murzyn works part-time for Wednesday Journal and is also a Realtor for Better Homes & Gardens Gloor Realty Company in Oak Park.